Keep Focused

Gold is on the rise. Investors
are excited, especially after last month's volatility, which
proved to be nerve wracking for many gold investors. This alone
reinforces why it's important to focus on the major trend.

Chart 1 shows gold's mega uptrend and as you
can see, the volatility over the past year doesn't look like
much. On the contrary, this chart illustrates gold's strength
as it sits near the high side of the rise that started in 2001.
This is the most important picture to keep in mind when investing
in gold. The bull market since 2001 is clearly underway.

If this mega uptrend and channel
stays in force, and we believe that it will for the reasons discussed
in our article of March 9, 2007, then this bull market rise is
going to make the 1970s spectacular rise look small in comparison.
It will take time, but it's powerful because it's more of a global
market today compared to the 1970s.

We can't stress enough how
important the major trends are. Most assets have been up since
2003, but it's also important to see where the real strength
lies. And it lies in gold because gold is better than stocks,
bonds and the currencies.

GOLD: BEST PROFIT POTENTIAL

Note that the mega trend changed
in 2002 when the ratio between gold and the Dow Industrials changed
to favor gold (see Chart 2). These changes do not happen
often but when they do, then the pendulum has swung and it still
has a long way to go. This means that gold will continue to outperform
stocks for years to come, like it's done in recent years. So
this is another key mega chart to keep in mind when investing.

When we say gold, we mean the
gold universe and the best investments within this ample sector.
That includes silver, the other precious metals, natural resources
and energy.

Other positive signs that reinforce
a powerful bull market are when gold is strong in all currencies,
and when all of the precious metals are rising in major uptrends.
This is happening today.

Gold is strong in all currencies
and so is silver (see Chart 3, which shows silver's surge
against the euro since 2003). And all of the precious metals
are on the rise.

SUPPLY NOT KEEPING UP WITH DEMAND

We have often discussed the
reasons why gold will stay on track to rise in the years, and
more likely decades ahead. Aside from growing global monetary
inflation, price inflation, out of sight deficits and debt, a
weak U.S. dollar and the war, there's also a growing shortage.
In fact, there's currently a shortage in many commodities.

Gold production is down around the world. South African gold
production, for instance, fell to its lowest level in 84 years
last year. From the U.S., to Australia, Peru, Russia to Canada,
production was also down. China was about the only country to
increase its production.

And this is happening while
demand is growing worldwide. The growth in China's demand for
commodities is unprecedented, which will keep prices high. Plus,
most investors don't realize that gold's been rising for six
years, gaining about 200%, and once this becomes more obvious,
it'll unleash a flood of new demand. Central banks are now also
selling less gold.

HEADED HIGHER

An intermediate rise we call
C started on January 5, which means it's been underway for about
three months.

C rises tend to be the best,
strongest rise in a bull market when gold reaches new bull market
highs. Gold is currently at a nine month high and it has a good
chance of testing and surpassing the May highs. For now, if gold
can rise and stay clearly above $690, then $722 will become an
easy target. Gold would be impressive above this level as it
would reconfirm that a very strong bull market is underway.

Mary Anne
& Pamela Aden are well known analysts and editors of The Aden Forecast, a market newsletter providing specific forecasts and recommendations on gold, stocks, interest rates and the other major markets.